Sector Rotation Context: Cannabis
I wanted to provide some broader context around the cannabis sector after posting about
$VFF.
While I firmly believe charts are the most important tool in investing, fundamentals can provide an additional layer of confluence. They help explain why a chart may be behaving the way it is and strengthen the conviction behind a thesis.
If we zoom out, the cannabis sector has largely been in a bear market since its introduction to public markets.
Like many emerging industries, valuations were initially driven by hype rather than operational performance. Capital flooded into a sector that was still in its infancy, while companies faced significant regulatory uncertainty and enormous capital requirements to establish market share.
The result?
Heavy debt issuance, widespread shareholder dilution, and years of underperformance as businesses attempted to build infrastructure ahead of demand.
Yet beneath the surface, the industry has continued to grow.
Sector Growth Estimates
• 2015 Market Size: $20B–$40B (≈23% CAGR)
• 2025 Market Size: $70B–$102B (≈22–26% CAGR)
• 2030 Projection: $210B–$300B (≈20% CAGR)
Regardless of which dataset you use, the conclusion remains the same: cannabis is growing at a sustained double-digit rate.
At the same time, the regulatory environment is becoming increasingly favorable.
Recent developments include:
• December 2025: Executive action directing completion of the Schedule III review process.
• April 2026: Final DOJ order placing FDA-approved cannabis products into Schedule III, while providing immediate relief from Section 280E tax treatment.
• June 29, 2026: DEA administrative hearing scheduled to evaluate broader Schedule III inclusion for recreational cannabis.
The significance of these developments cannot be overstated.
Improved access to banking services, lower effective tax burdens, stronger free cash flow generation, and reduced financing costs could dramatically alter the economics of the industry.
Considering recreational cannabis represents roughly 65% of total market demand versus 35% for medical use, further regulatory progress would likely expand industry growth projections materially.
Add in a U.S. midterm election cycle, where cannabis reform remains broadly popular with voters, and the policy tailwinds become even more apparent.
From a government's perspective, it's difficult to ignore a rapidly growing industry capable of generating substantial tax revenue while maintaining broad public support.
Now let's connect the fundamentals to the charts.
To me, this remains a sector trading in extreme discount territory despite meaningful improvements in both operating performance and regulatory conditions.
$VFF is a good example.
The company achieved operational profitability in 2025 and has already appreciated more than 800% from its multi-year lows near $0.50.
Yet despite that move, I don't believe the trend has fully matured.
From a higher-timeframe perspective, bullish market structure has already been broken to the upside, suggesting the possibility of a much larger re-rating phase.
Could price revisit the gap near $1.72 on the USD chart?
Absolutely.
A move lower of another 15-20% remains possible.
However, when I compare sector-relative charts, I see stronger evidence supporting a developing reversal than a continuation lower.
For those who follow ratio analysis, take a look at:
• MSOS / XLY
• VFF / VEGI
Both are retesting significant break-of-structure levels that, in my view, offer meaningful intermarket confluence. On these charts, we've already filled gaps🤔 I've also attached a chart comparing the Cannabis sector to DBA (primary agriculture index) with a clear breakout structure.
Most investors analyze assets in isolation.
I prefer to analyze them relative to competing sectors, capital flows, and broader market positioning.
That's where the edge often exists.
My Position
NFA, but I've continued scaling into
$VFF around current prices within my accumulation zone.
The risk/reward remains attractive in my view.
Ironically, I think the open gap below is creating analysis paralysis for many traders. While waiting for a perfect entry may feel safer psychologically, it can actually increase risk from a trade management perspective.
An entry near $1.72 would likely require a much wider stop below the $1.30 area, creating a less efficient risk profile.
For me, the thesis remains straightforward:
A sector that has spent years correcting excess speculation is now showing improving fundamentals, favorable regulatory momentum, positive operating results, and emerging higher-timeframe technical strength.
That's the type of asymmetry I look for.
One additional point worth mentioning: this is not my first position in VFF.
I accumulated shares near the 2024-2025 lows around $0.55 and exited after the stock appreciated more than 800%.
I mention this not to highlight the outcome, but because it provides a useful reference point. The same framework that identified value when sentiment was overwhelmingly bearish is beginning to identify value again.
The setup is not identical, but the characteristics are familiar: a deeply discounted sector, improving fundamentals, positive regulatory momentum, and technical evidence that capital may be rotating back into the space.